Total personal incomes outpaced spending in April, a signal that the economy could be on firmer ground, the Commerce Department estimated Friday.
Total personal income rose by a seasonally adjusted 0.4% in April to an annual rate of $12.27 trillion U.S. Adding to the sense of strength, income in March was revised upward to a 0.4% gain, compared with the prior estimate of a 0.3% increase.
Incomes were in line with expectations.
After-inflation, after-tax disposable incomes rose 0.5% in April. This is the largest increase since May 2009.
Consumer spending was flat in April after six straight monthly increases. Spending was weaker than the 0.1% gain forecast by economists.
Inflation-adjusted real spending was also flat in April after a 0.6% gain in March.
With disposable incomes rising faster than spending, the personal savings rate jumped to 3.6% in April from 3.1% in March. This is the highest level since January.
Economists said that consumer spending can only be sustained over time if it is supported by higher income growth and job creation. The economy has added 573,000 net new jobs so far this year.
If the income growth seen in April and March is sustained, it could lead to higher confidence and more spending.
While consumer spending was weak in April, it rose at a 3.5% annual rate in the first quarter, the fastest pace in three years. So the question will be whether this is a pause or a longer-term trend.
Inflation was tame. The personal consumption expenditure price index was unchanged in April and core prices (which exclude food and energy) rose 0.1%. In the past year, consumer prices are up 2.0%, while core prices are up 1.2%, the slowest annual pace since last September.
Real spending on durable goods rose 0.1% in April after a 3.6% gain in March.
Real spending on nondurable goods fell 0.1% after a 0.4% gain. Real spending on services rose 0.1% after remaining unchanged in March.
Real income excluding transfer payments -- one of four key recession-expansion markets -- rose 0.6%
